Jonathan Sibun and Lisa Haines

14 Oct 2006
Consultants warn of possible asset bubble as investors raise record new funds

Banks have made nearly $1bn in advisory and financing fees in the booming global infrastructure market this year, prompting consultants to warn that investors are putting returns at risk by buying overpriced assets.

Advisory fees in the global mergers and acquisitions market have hit $830m this year, nearly treble the size of the fees pool at the same time last year, according to Dealogic, a data provider. Financing fees total $128m, taking the total to $958m. The value of deals has reached nearly $500bn, more than the total for the past four years.

Goldman Sachs, which did not rank among the top 25 infrastructure advisory banks last year, leads the field, having earned more than $107m in advisory and financing fees, according to Dealogic.

The growing number of companies raising infrastructure funds, and hedge funds and pension funds targeting investment in the sector, as well as continued pressure on governments to raise funds by selling assets, suggest the market will remain busy well into 2007, according to bankers.

Ten infrastructure funds have been raised this year, with a further 17 being raised, according to research by Private Equity Intelligence. That compares with nine funds raised last year and seven in 2004. The average size of the funds has risen from $222m in 2000 to $518m this year.

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Posted by rjorr at October 14, 2006 9:10 AM